This article first appeared on GuruFocus .
Release Date: August 06, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Integration is on or ahead of schedule, with the mandatory tender offer closed and the reverse merger approved, positioning the company for a complete two-bank merger in seven months.
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New volumes surged 36% year-on-year to $3.8 billion, driven by strong growth in factoring (up 29%), NHS and PA (up 65%), and tax credit (up 70%), indicating the removal of previous capital constraints.
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Adjusted profit before tax on an aggregated basis improved to $22.3 million in H1 2026 from $13 million in H1 2025, reflecting enhanced operational performance.
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The securitization of NPEs related to public administration exposure is structured to have zero economic impact (sale at net book value) and is expected to release capital, with binding agreements already signed with a third-party investor.
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The assurance process on the new definition of default rules is complete, with no material findings in collection procedures, IT, or operations, and the company expects no further extraordinary provisions on this topic.
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Capital position is expected to improve further, with CET1 ratio projected to reach 12%-12.2% by year-end, supported by the deconsolidation of KK and the closure of a credit line.
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The company is actively exploring M&A opportunities to grow scale, expand internationally, and reduce cost of funding, with a focus on accretive deals.
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Cost of funding target is set at Euribor plus 20-25 basis points, indicating a disciplined approach to liability management.
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The NPE coverage ratio increased to 32%, and the company has a 100% hit ratio on guaranteed collections from SACE/MCC, underscoring robust risk management.
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The legacy business is in runoff, and the company is strategically reviewing the salary-backed loan business to improve overall profitability.
Negative Points
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The consolidation perimeter is complex and moving, with Q1 and Q2 including different entities (CF+ and Banca Sistema, but not KK), making financial comparisons challenging for investors.
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The assurance process resulted in an additional 40 million of past due exposures and 11.9 million of impairments, increasing the net NPE ratio from 9.4% to 11%.
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The badwill of 96.6 million is a significant extraordinary item, and while it is IFRS-compliant, it may distort reported profitability and is subject to further adjustments.
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Integration and transaction costs of 10.9 million have been incurred, and additional costs are expected in H2 2026, though the company did not provide a specific figure.
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The salary-backed loan business is under scale and not performing well, with a return of only 2%, and the company expects it to turn negative once operating costs are fully allocated, necessitating a strategic review.
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The financing business, primarily guaranteed lending, saw volumes decline 44% year-on-year due to the temporary unavailability of the SACE guarantee scheme in Q1.
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The securitization transaction is still subject to Bank of Italy authorization, and its benefits (capital release and past due reduction) are not yet reflected in the financials.
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The CET1 ratio decreased from 11.4% to 11% in H1, impacted by the assurance process and PPA adjustments, though partially offset by KK deconsolidation.
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The company's cost of risk is expected to normalize at 60-70 basis points for the full year, which is higher than the recurring 43 basis points reported, indicating potential credit quality challenges.
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The PPA process is still ongoing and may lead to further adjustments to the badwill and other balance sheet items, creating uncertainty for investors.
Q & A Highlights
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Q: Regarding the securitization, can you confirm the transaction did not result in any loss for the bank and that you have already identified a buyer for the mezzanine and junior tranches? Also, was the positive factoring volume trend driven by the temporary absence of securitization or genuine commercial momentum? What do you expect the common equity ratio to settle at once the merger and SRT transaction are fully completed? A: (CEO Jacopo DeFrancisco) On the securitization, we have signed binding agreements with a third-party investor for the sale of the mezzanine and junior notes, so it is more than just identifying a buyer. The sale price is aligned with our net book value, resulting in zero economic impact. The capital impact comes from removing high-risk-weight exposure (150%) while retaining the senior note at a 78% risk density, and we have also factored in the impact on accrual models. The transaction is subject to Bank of Italy authorization. On factoring volumes, the growth is not related to securitization but reflects genuine commercial momentum, as Banca Sistema is no longer reselling exposures due to capital constraints, and the tax credit securitization program has been closed, keeping 100% of volumes on our books. CF+ is also performing well on a stand-alone basis. On capital, we expect a CET1 ratio of 12% to 12.2% by the end of the year, considering the merger and full effects of the KK deconsolidation.
Q: Now that the assurance exercise is complete with the 40 million reclassified to past due and almost 12 million of charges booked, do you expect the cleanup to be finished? What is the normalized cost of risk for the second half of 2026, and can you provide color on potential integration costs for the second half? A: (CEO Jacopo DeFrancisco) On integration costs, you can keep the specific number from your recent report as a reference. On the cleanup, the assurance was a critical activity requested by the regulator related to the 2024 Bank of Italy inspection on the new definition of default. We have completed the assurance on procedures, policies, IT, organization, and numbers, and the chapter is now closed. We do not expect other extraordinary impacts related to the past-due topic. However, ordinary provisions will continue as part of normal business. For normalized cost of risk, excluding the 11.9 million one-off, we expect a range of 60 to 70 basis points by the end of the year.
Q: Can you share your expectations for the cost of funding going forward? Also, can you provide details on the updated badwill amount versus the previous number given in Q1? Lastly, regarding M&A optionality, does the review of the SBL business open the door to other types of activities in the market? A: (CEO Jacopo DeFrancisco) Our target for the cost of funding this year is Euribor plus 20 to 25 basis points. On M&A, we are active and paying close attention to opportunities. We have three strategic directions: growing in scale in our businesses, growing internationally, and finding non-organic solutions for our cost of funding. All opportunities are assessed based on return and value creation. On the SBL business, it is under scale and not performing as well as other lines, so we are considering all potential strategic opportunities. (Head of Planning and Control, Luca Gislandi) On the badwill, the increase to 97 million in Q2 from 21 million in the previous quarter is mainly due to the deconsolidation of KK, which released a sizable amount of goodwill. Other effects are slight adjustments on the fair value of assets. The PPA process can last up to a year, and these figures are provisional and will be updated quarterly.
Q: Should I consider that most of the badwill amount won't change much despite the 12-month PPA assessment? And regarding M&A, is there a preference in the sequence of growing scale, international growth, or cost of funding solutions? A: (Head of Planning and Control, Luca Gislandi) The badwill can change again next quarter, but we do not expect a sizable change like the one between Q1 and Q2, as that was mainly impacted by the deconsolidation of KK, which won't happen again. (CEO Jacopo DeFrancisco) On M&A, our point is to reduce our cost of funding. We may have interest in M&A that reduces cost of funding, increases scale in our existing businesses, or helps diversify geographically and by business line. We have high appetite and targets in terms of return, so any strategic action on the asset or liability side needs to prove it is accretive. On the badwill, all areas that needed to be identified have been identified and sized within the current number, so we don't expect much change, though minor effects are possible.
Q: Can you provide more details on the assurance process and its financial impact? A: (CEO Jacopo DeFrancisco) The assurance process, which was requested by the regulator following the 2024 Bank of Italy inspection, covered four key areas. First, we verified the application of the new definition of default rules, including materiality thresholds and mitigant adoption, which resulted in an additional 40 million reclassified to past due. Second, we reviewed collection procedures, IT, and operational processes, finding no material issues. Third, we reviewed tax credit and factoring litigation, resulting in an additional 5 million risk charge. Fourth, we analyzed the resolution construct, confirming its legal validity but booking 6.9 million in additional impairments. The overall impact is 40 million in additional past due and 11.9 million in impairments, which have been fully reflected in the half-year results.
Q: What is the status of the integration process and the reverse merger? A: (CEO Jacopo DeFrancisco) The integration is on or ahead of schedule. The mandatory tender offer closed on June 15, with CF+ holding 85.6% of Sistema. On June 22, the translisting of KK was completed, and Crusoe Capital was deconsolidated, with our participation now around 2% and targeted to reach zero. On June 24, both boards approved the reverse merger and exchange ratio. We expect Bank of Italy authorization by September, legal and operational merger completion by mid-November, and the new business plan by year-end. Every milestone has been hit or is on track.
Q: Can you explain the moving consolidation perimeter and how it affects the reported numbers? A: (CEO Jacopo DeFrancisco) The consolidation perimeter is not the same for the balance sheet and P&
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
